How pensions go off a cliff: A case study

San Jose’s pension troubles are widely acknowledged if little understood. Developments in Los Angeles may point towards even more trouble as Jack Humphreville reports for City Watch. 

“The City’s Annual Required Contributions to its two pension funds have increased 56% ($475 million) since Eric Garcetti was elected mayor, from $848 million to $1.32 billion for the upcoming fiscal year beginning July 1, 2020.

“Over the next four years, the Annual Required Contributions are projected to increase by 42% ($556 million) to $1.86 billion according the City’s Four-Year General Fund Budget Outlook.

“Since the City’s Annual Required Contributions are increasing at a faster rate than tax revenues, they will devour almost 25% of the General Fund by 2024-25, up from the current level of 20%.  This will crowd out basic services such as aid to the homeless, climate change initiatives, response to the virus, and the repair and maintenance of our streets, sidewalks, urban forest, parks, and the rest of our neglected infrastructure.

“The unfunded pension liability of almost $9 billion is the City’s largest financial obligation.  It is the equivalent of high cost debt.  The Annual Required Contributions are eating the City’s lunch, becoming an increasing portion of its budget.  We need transparency and solutions.  We cannot afford to continue to kick the pension plan obligations down our lunar cratered streets.  We need an independent pension commission to kickstart pension reform."

Read the whole thing here..

Jack Humphreville writes LA Watchdog for CityWatch. He can be reached at:  lajack@gmail.com.

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